WORLD PROPERTY CHANNEL ®

Tom Frye

(NASHVILLE, TN) -- The country music capital of the country may be seeing a resurgence in retail real estate activity this year, according to a new 2010 Outlook Report by CB Richard Ellis.

Citing the CBRE analysis, the Nashville Business Journal reports that although retail development "slowed to a crawl" in 2009 and few retail properties traded hands, the Nashville retail market "is showing remarkable strength."

The report states "vacancy rates have remained steady and although some markets have experienced decreases in asking rents ..., national retailers continue to look to look to Nashville as an attractive market in their growth strategies.

"We predict a continued slow climb back out of the recession for Nashville's retail market in 2010, but see signs of activity that make us believe 2011 may tell a very different story,"  says Tom Frye, managing director of the Nashville CB Richard Ellis. He authored the report

If 2009 was a year of fear in the Nashville commercial real estate market, 2010 will be the year of patience, the report states.

Demand will firm this year for space, particularly in the office sector, but Frye cautions that "a complete turn around, we believe, will be very slow to materialize."

The report predicts that office vacancy will peak nationally this year at 19 percent, the highest level since the recession of the late 1980s.

Office vacancy in Nashville, however, ended 2009 at 14.4 percent which the CBRE report suggests will be Nashville's peak vacancy.

One Greenway Center, Cool Springs, TN.

Noting that only 160,000 square feet of new office space that is not preleased will be constructed this year the report suggests that total vacancy in Nashville should drop this year to 12 percent or 12.5 percent.

The new office space is at Crescent Resources' One Greenway Centre in Cool Springs, TN.

"A lease signing by a large tenant is the only way we will see a new office construction start this year," says the report. "The tenant will have to take perhaps 75 percent of the total space and will have to be creditworthy."

With vacancy "not out of control," the report says office rents should remain stable.

"The essence of our office market in 2010 is that we will see the beginning of a turn. We should lead most of the country in that regard, though it will not be a profound change from what we are experiencing currently," according to the report.

On the industrial front, the report claims that sector is "calm after a tumultuous 2009."

The report suggests that no new construction will occur before the fourth quarter.  Ten distribution facilities opened in 2009 in the Nashville area, and all are currently vacant and available.

The report forecasts 1.25 million to 1.5 million square feet in net absorption for the industrial sector in 2010, primarily in bulk distribution space. For comparison, the Nashville industrial market absorbed 1.3 million square feet in 2009. 

---